13 of the 27 EU member states already exercise rent control
Thirteen of the 27 Member States of the European Union (EU) have already had an income control block – of the European countries outside the EU, only Iceland has no regulatory constraints on limiting and increasing rents, which changed between the evolution of an income value initial or limitation, or even prohibitions, of increasing rents.
According to a report by the OECD (Organisation for Economic Co-operation and Development), 23 of the 38 Member States impose regulations on increases during the duration of the contract and in 13 of them there are regulations for the initial value.
The Executive of António Costa, as revealed this Tuesday by ‘Diário de Notícias’, has made little use of analyzing the experiences of other countries to regulate the market, despite the fact that, according to data from the 2021 Census, more than 40% are already housing units that pay income between 650 and 999.99 euros. It is estimated that Portugal is the country in Europe in which the dropout rate has risen the most since 2015.
Pedro Nuno Santos, then Minister of Infrastructure and Housing, created in May 2022 a “working group on housing issues” to “see what is being done in other EU countries and, if conditions exist, apply in Portugal”. However, the result of this analysis on rent control systems is not known, a hypothesis always disregarded by national governments, even though the freeze remains in agreements prior to 1990.
“The history that exists in relation to this issue” explains this reluctance, considered to the daily newspaper Dulce Lopes, jurist and professor at the Faculty of Law of the University of Coimbra who is part of the project ‘Housing Policy in the European Union’. “The rent freeze created a collective trauma. There is the idea that public intervention in the market should be limited.”
A May 2022 study by the Universities of Glasgow and Bristol distinguishes two European realities: those who have an “income regulation system” and those who do not. Thus, in Austria, Denmark, Germany, Ireland, Holland and Sweden there is control of initial rents, as well as in France (in large cities). Rent increases are subject to rules in Austria, Belgium, Croatia, Cyprus, Denmark, France, Germany, Ireland, Luxembourg, Netherlands, Norway, Poland, United Kingdom (Scotland only), Spain, Sweden and Switzerland. Portugal emerges as a country in which, except for contracts prior to 1990, there are no regulations.
New Zealand was, in 2018, one of the first countries to inaugurate new laws that, in the name of protecting the right to housing, limit the purchase of foreigners. Canada followed suit: from 2023, for two years, the purchase of housing by non-resident foreigners is prohibited. In Portugal there was also this paradigm shift: from a small traditional market to large investors, often international: with almost non-existent public investment and a deficit rental offer, the conditions for a perfect market were created.
“The State has to be more robust in the support it gives in housing”, warned a jurist to ‘DN’, who preferred not to be identified. “You have to invest in the offer, of course. But the result of this takes time, so it is necessary to think about other forms of intervention. A limit on the increase in rents has already resolved part of it. And maybe touch the appreciated. There are IRS incentives for long-term housing leases [que chegam a um “desconto” de 18 pontos percentuais, de 28 para 10%, para quem celebre contratos de mais de 20 anos], but unrelated to the amount of income. Now that makes little sense. The 28% tax rate, which was set to encourage enthusiasm, was supposed to vary with income. Exemptions should be created for certain amounts, and eventually increase the rate on higher incomes.”
Dulce Lopes considered that “Portugal is falling a little short of what other countries are doing”.